Mayville Engineering Company, Inc. · NYSE:MEC
Mayville Engineering — Q3 2023 Earnings Presentation
18 slides from Mayville Engineering's earnings presentation, Nov 1, 2023
Slide 1: 3Q23 Results Presentation
3Q23 Results Presentation November 1, 2023
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995: This presentation contains statements that are forward-looking in nature which express the beliefs and expectations of management including statements regarding the Company’s expected results
Slide 3: 3Q23 Financial Performance
3Q23 FINANCIAL PERFORMANCE Successful strategic execution delivers margin expansion and continued organic revenue growth Beginning to see early benefits from MBX • Net sales +16.1% y/y including organic growth of 6.2% y/y, due to the acquisition of MSA framework while and supported by stable demand
Slide 4: Third Quarter Financial Performance
THIRD QUARTER FINANCIAL PERFORMANCE Net Sales Adj. EBITDA & Margin Adjusted Diluted EPS Free Cash Flow ($MM) ($MM & % of Net Sales) ($/share) ($MM & % of Adj. EBITDA) +29.5% (37.4%) (8.6%) +16.1% $16.1 $0.33 $158.2 +19.0% $0.30 $20.9 $19.2 $16.1 $0.21 84% $136.3 13.2% $5.2 12.1% 11.8% 32% 3Q22 3Q23
Slide 5: 2024 End-Market Outlook
2024 END-MARKET OUTLOOK End-market demand is softening but market-share gains will offset in 2024 Commercial Construction Powersports Agriculture Military Other Vehicle & Access MEC Macro Assumptions: Assumptions: Assumptions: Assumptions: Assumptions: Assumptions: • Demand slowing in 4Q23 • Soft re
Slide 6: Net Sales & Adjusted EBITDA Performance Highlights
NET SALES & ADJUSTED EBITDA PERFORMANCE HIGHLIGHTS Organic sales and profitability growth highlight early success of MBX framework Strong Organic Growth in Key End Markets 3Q Net Sales Reconciliation Revenues grew 6.2% organically y/y as Commercial Vehicle, ($s in Millions) Powersports & Military ne
Slide 7: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Capital allocation priorities focused on maximizing cash flow and return on invested capital Balanced approach to capital allocation Capital Expenditures ($MM) Consistent Debt Paydown $59 • Net leverage slightly below 2.5x as of September 30, 2023 • Targeting leverage o
Slide 8: Disciplined Capital Management
DISCIPLINED CAPITAL MANAGEMENT Flexible balance sheet with ample liquidity to support long term growth Total Cash & $250 $198 Available Liquidity1 $150 ($MM) $170 Total Net Debt2 ($MM) $71 $75 Net Leverage Ratio3 2.4x 2.5x 1.3x $76 $92 Net Working $75 Capital4 2021 2022 3Q23 1) Assumes continued com
Slide 9: 2023 Financial Guidance
2023 FINANCIAL GUIDANCE As of November 1, 2023 Business Outlook Financial Assumptions • General stability in end-market • Improve upon existing relationships • Raw-material price pass-throughs • Hazel Park to have a dilutive impact of demand, but considers the potential while building new and adjace
Slide 10: Value Creation Roadmap
Value Creation Roadmap (1) MBX Framework expected to drive substantial financial value and shareholder returns Sales Performance Adjusted EBITDA Performance Free Cash Flow Performance $s in Millions $s in Millions and as a % of Sales $s in Millions 8-12% $750 - $850 300-400 BPS $105 - $135 $65 - $75
Slide 11: Organic Growth Acceleration
Organic Growth Acceleration (1) 3-Year Organic Revenue CAGR of 8% - 12%, before incremental M&A Three Year Sales Reconciliation (1) $s in Millions $750 - $850 $30 - $50 ($20) - ($30) Pricing Excellence End of Life M&A $60 - $80 $100 - $140 MSA Growth $580 - $610 2023E 2026E (1) Inclusive of Mid-Stat
Slide 12: Accelerated Margin Expansion
Accelerated Margin Expansion Targeting 3-Year Adjusted EBITDA margin expansion of 300bps – 400bps 3-Year Adjusted EBITDA Margin Reconciliation Adjusted EBITDA as a % of Sales ~ 50bps ~ 50bps (200) - (250)bps 100 - 150bps Wage Inflation 100 - 150bps Leveraging SG&A MBX / Labor Productivity Plant Util
Slide 13: Investment Thesis
INVESTMENT THESIS Strategic evolution story supported by attractive re-shoring and outsourcing mega trends • Strong demand fundamentals across our end markets, supporting profitable growth • Value creation platform expected to drive Adjusted EBITDA margins to 14% - Strategic 16% and organic revenue
Slide 14: Appendix
APPENDIX
Slide 15: Historical Material Price Pass-Through
HISTORICAL MATERIAL PRICE PASS-THROUGH Material Price Pass-Throughs (Y-o-Y Change in $MMs) 1Q 2Q 3Q 4Q Full Year 2021 $ — $ 2.8 $ 5.6 $ 15.0 $ 23.4 2022 $ 14.6 $ 10.4 $ 2.5 $ 0.5 $ 28.0 2023 $ (9.9) $ (8.3) $ (0.5) $ — $ (18.7) 15
Slide 16: Non-GAAP Reconciliation of Adjusted EBITDA
Non-GAAP Reconciliation of Adjusted EBITDA Q3 ($MM) 2023 2022 Net income and comprehensive income $ 1.4 $ 6.6 Interest expense 3.9 0.8 Provision for income taxes 0.6 1.5 Depreciation and amortization 9.6 7.1 EBITDA $ 15.5 $ 16.0 CEO transition costs — 0.9 MSA acquisition related costs 0.5 — Stock-ba
Slide 17: Non-GAAP Reconciliation of Adjusted Net Income & Diluted EPS
Non-GAAP Reconciliation of Adjusted Net Income & Diluted EPS Q3 ($MM, except share amounts and per share values) 2023 2022 Net income and comprehensive income $ 1.4 $ 6.6 CEO transition costs — 0.9 MSA acquisition related costs 0.5 — Stock-based compensation expense 1.3 0.1 Hazel Park transition and
Slide 18: Non-GAAP Reconciliation of Free Cash Flow
Non-GAAP Reconciliation of Free Cash Flow Q3 ($MM) 2023 2022 Net cash provided by operating activities $ 19.6 $ 17.6 Purchase of property, plant and equipment (3.5) (12.5) Free cash flow $ 16.1 $ 5.2 Adjusted EBITDA $ 19.2 $ 16.1 Free cash flow conversion(1) 84% 32% 1) Free cash flow conversion is c
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